To answer the following question, please refer to the figure below. Concentrating only at the lower right quadrant, discuss the effects of a change in U.S. expected inflation. What will be an ideal response? ANSWER Lower right quadrant shows the equilibrium in the U.S. Money Market, where = / A given interest rate R1$ […]
What is the expected dollar rate of return on dollar deposits if today’s exchange rate is $1.10 per euro, next year’s expected exchange rate is $1.165 per euro, the dollar interest rate is 10%, and the euro interest rate is 5%? A) 10% B) 11% C) -1% D) 0% E) 15% ANSWER A
Which of the following is not one of the theories that have emerged as alternatives to the HO model? A) The human skills theory. B) The product life cycle theory. C) The similarity of preferences theory. D) All of the above have been suggested as alternatives to the HO model. ANSWER D
The evidence cited in the chapter using the examples of the East Asia New Industrializing Countries suggests that as international productivities converge, so do international wage levels. Why do you suppose this happened for the East Asian NICs? In light of your answer, what do you think is likely to happen to the relative wages […]
________ refers to the irregular meetings of creditor governments with debtor nations desiring rescheduling of debts. A) The Paris Club B) IMF “conditionality” C) IBF D) LIBOR ANSWER A
Large current account deficits imply large financial account surpluses. Indicate whether the statement is true or false ANSWER TRUE
A corporation is considered a multinational ________ if ________. A) parent; it owns more than 10% of a foreign firm B) parent; more than 10% of its stock is held by a foreign company C) child; more than 10% of its stock is held by a foreign company D) child; more than 50% of its […]
An American firm that buys foreign exchange because its managers expect the dollar to depreciate is A) increasing the supply of foreign exchange. B) increasing the demand for foreign exchange. C) speculating. D) Both A and B. E) Both B and C. ANSWER E
Analyze the following statement “the global financial crisis of 2008-2009 was a great illustration of how interdependent national economies are.” What will be an ideal response? ANSWER True. The global financial crisis that started in 2008, although commonly blamed on the U.S. quickly spread to all economies in the world. Although overt global policy […]
Latin American economies have become relatively more closed to international trade since 1985. Indicate whether the statement is true or false ANSWER FALSE
